The Bush administration said on Friday it could be willing to provide emergency aid to the teetering US auto industry, keeping open the prospects for a bailout the day after Congress failed to approve a deal. Warning of dire consequences for the recession-hit US economy if the once-mighty automakers collapsed, the White House - in a reversal of policy - said it was ready to consider dipping into a $700 billion Wall Street bailout fund to help keep the companies afloat. A bankruptcy filing by General Motors Corp. or Chrysler LLC might send the US economy into chaos within weeks if it led to a shutdown at the companies. Industry experts and economists said the automakers would close plants, fire tens of thousands of workers and cut production. That would cause many of their suppliers to collapse, triggering more job losses, straining the cities and states where the car and parts companies operate, as well as federal safety-net programs. It would also deliver another psychological blow to consumers and a major shock to Main Street following the crises on Wall Street. “The auto industry is a key element in the economy,” said Bob Schnorbus, chief economist at J.D. Power & Associates in Troy, Michigan. “Anything that disrupts it is going to slow the economy down more than we have already seen.” Economists said it's difficult to estimate the full impact, given the large number of possible scenarios. The outcome hinges on which companies filed for bankruptcy and when, and whether they would be able to continue building cars and trucks while in reorganization - assuming they don't go into liquidation. “It would be unprecedented,” said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. “So it's hard to say exactly what would happen.” Still, a GM or Chrysler bankruptcy “would be the start of a cascade of failures,” said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. “The economy will be in chaos within weeks.” The effect of a bankruptcy on growth would be significant, although economists say it won't be as great as in decades past. Gross domestic product fell at a 4.2 percent annual pace in the fourth quarter of 1970 - when, like today, the US was in a recession - following a 67-day nationwide strike against GM. Now, auto production accounts for only about 3 percent of GDP, Stanley said. “It would obviously be a sizeable jolt to the economy,” he said. “But the sector is not as important as it was.” Even so, statistics from the Center for Automotive Research in Ann Arbor show 239,000 people work in the US for GM, Chrysler and Ford Motor Co. The center, which does research for the auto companies, estimates total job losses would reach 2.5 million if GM failed and 3.5 million if all three auto companies went out of business in 2009. That includes 1.4 million people in industries such as retailing that aren't directly tied to manufacturing. Economists said each manufacturing job is responsible for an additional six outside the industry. While many analysts say the Center for Automotive Research totals are exaggerated, the number of jobs eliminated would still be staggering. The total would depend on whether Americans keep buying cars and trucks. While a Chapter 11 bankruptcy would allow the automakers to continue making vehicles while they restructure, GM, Ford and Chrysler have argued that deliveries would drop precipitously.
